Bank exits won't lead to Credit Crunch but beware of rising costs of banking
A CREDIT crunch in the agriculture sector is unlikely despite the loss of two serious players in the farming scene. However, the flight of Danske Bank and ACC bank does point to higher costs for customers down the line.
The good news is that the shutting of the two banks won't create anything like the fall-out that hit hotels when Bank of Scotland (Ireland) (BoSI) pulled the plug in 2010 for example.
Hotels were badly hit by the loss of BoSI but there are big differences for agriculture this time around.
In 2010, many hoteliers were looking to roll over loans drawn down during the boom, and knocking on the doors of banks that had little or nothing to lend.
This time around the longer-term loans being sought by farmers, especially in the dairy sector, are targeted at expansion.
However, more importantly, the main banks have cash to lend at the moment.
The loss of ACC Bank and Danske Bank will undoubtedly cause disruption for thousands of their farm customers.
They could do without the hassle of switching accounts, arranging new overdraft facilities – always easier when they are not needed – and having to build new bank relationships.